Market Recap - Wednesday 13th April

If you are like me and you mainly watch the futures, then the action from the last few days have been more bearish than what the cash indexes suggest especially last night. Indeed Monday's open was a big clue as we had no buyers with the SPX at 1330


The MO of the market for the last 3 days, has seen the futures sold off right at the open and market internals have trended weaker the whole day. Yesterday the cumulative tick finished at whopping -170,000 which is overwhelmingly bearish given that a normal day's range is somewhere between +/- 40,000. This figure is a summation of the stocks ticking up versus stocks ticking down. Therefore it implies that the large majority of stocks were being sold on the bid. This was the trend for the entire day. 


From a volatility standpoint, it would appear after going through the skew charts on Livevol that term structure has tightened a great deal over the last week, while implied vols have stayed fairly constant. This to me is not the norm as most sell offs of significance of late have been due to some geopolitical event that causes vertical skew to increase and the general level of implied vols to rise as well (as well as a tightening in term structure). I don't want to over analyse but it would appear that the recent 4 days of selling is not the norm and perhaps we are seeing a fundamental shift in the market going forward eg. maybe it is re-adjusting for the view that liquidity is going to be drained sooner rather than later ie ECB raised rates, end of QE2, tightening of fiscal policy etc etc. Either that or it's just a head fake from the professionals and fund managers before they rip the market higher (the selling does seem a bit contrived). After all most market watchers including myself were thinking that a retest of the old highs was a foregone conclusion. (Remember the market does what it can to fool as many people as possible!)


Perhaps I'm making too much of it as the market maybe in the midst of normalizing here. ie I've been too used to the dip buyers showing up and taking the market back up whenever we had a pullback.


It will be interesting to see how it plays out from here. Quant studies seem to strongly suggest a bounce is in order. They've been calling this the last 2 days now and the market hasn't bounced so you have to respect the market when it's not following historical norms. I am long here and could do with a bounce.